economic mobility

“Pulling yourself up by your bootstraps” is a phrase that used to describe trying to do something that was nearly impossible. (Imagine, for a moment, trying to stand up by pulling on your own shoes. You’d look pretty silly.)

But somewhere along the way, it’s become short-hand for the kind of crowd-pleasing rags to riches stories found everywhere from movie screens to the evening news.

Education is one of the best ways to get ahead in America. So, why do so many young people from poor backgrounds drop out? An economic paper published this month by the Brookings Institution suggests one possible answer, and it has nothing to do with grades or test scores. Maybe, for kids who grow up poor, with evidence of inequality all around them, dropping out of school just seems like the rational choice.

It should be the opposite. Most economists would say, kids who start out at the bottom of the economic heap should have the incentive to get as much education as possible. Many economists believe the problem really comes down to skills. Young people trying to climb up out of poverty want to be highly educated, the thinking goes. They just don't get the right skills and training along the way. In this model, the education system itself is where the problem occurs, and that's where the fix is needed.

We're data geeks here at State of Opportunity. And there's a treasure trove of data (and more to come!) housed at the Institute for Social Research at the University of Michigan. The Panel Study of Income Dynamics (PSID) has been around since 1968 and is the longest-running household panel survey in the world. We're talking tens of thousands of data points from more than 70,000 individuals over more than four decades.

Researchers have mined PSID data for all kinds of economic mobility studies. My colleague Dustin Dwyer blogged about it back in 2012 before he went to a U of M conference where social scientists presented their findings using PSID data across three generations:

I've already had a chance to look at some of the papers that will be presented, and there are some tantalizing findings. Jean Yeung of the National University of Singapore and two co-authors from New York University looked at the black-white achievement gap across three generations. They found evidence that discrimination in the grandparent's generation had an impact on children's outcomes decades later.

Other papers look at the effects of extended family – aunts, uncles, cousins – to see how they affect economic mobility in other countries.

In the early 1800s, the newly formed state of Georgia had a lot of new land under its control. The land had been taken mostly from the native Muskogee and Cherokee people, and leaders of the young American state were looking for ways to transfer the land to white settlers. What they ultimately decided on was a series of lotteries.

The forced transfer of property from native people to white settlers was common in America during the 19th century, but the lottery system was not. It meant that basically any white male adult in Georgia, rich or poor, had the same shot at winning a valuable piece of land. And, while the system itself was unjust and just plain wrong on multiple levels, it also set up an ideal research experiment.

If you're a social scientist looking back, what you see in Georgia in the early 1800s isn't just a lottery, it's a randomized controlled trial. And it allows economists to ask a question that's still relevant today: What happens to a family when it suddenly comes into wealth?

We know that kids who grow up in low-income homes are less likely to have high incomes as adults. But which factors most help kids climb the economic ladder, and which hold them back? The Pew Economic Mobility Project put together a handy, interactive site where you can combine different factors such as race, marital status and education to determine which combinations give people the best odds of getting ahead. Are you a single black female? If you get a college degree, your chances of climbing the economic ladder are at 83 percent. Same person, no degree? You have only a 9 percent chance of moving up, according to Pew.

The New York Times has an interactive graphic that lets readers compare economic mobility across the country. Several towns and cities in Michigan are places where it is least likely a child will be able to climb out of poverty and move up to the top of the economic ladder. Children from the Grand Rapids area are only .7% more likely than kids from the Detroit area to successfully make the climb. Roll over the map for data from your area and the rest of the country.

Oh the summer holidays. Frankly, some things in the news get missed. So I'm glad the folks at Sociological Images were paying attention to recent economic data bout consumer spending and economic recovery the Wall Street Journal originally broke down.

According to their analysis the talk of true economic growth might be premature. As a nation, we might be spending more now, but we're not really making any more money than we were before. That doesn't seem like a recipe for sustained recovery.

This chart comes from a report released yesterday by the Pew Economic Mobility Project. The report looked at the effects of unemployment on American families. Overall, the report says one third of families in America experienced some form of unemployment between 1999 - 2009. But minority families were far more likely to be affected. Forty-one percent of black families and 51 percent of Latino families experienced unemployment during the period, compared to 30 percent of whites.

Your participation and insightful guests made for a spirited discussion about themes ranging from power to policy, but really the question was if all kids have an equal shot at an American dream. (Spoiler alert: none of the guests think all kids have an equal shot.)

Listen to parts of the show below. If you want to listen to the whole thing, here you go.

Be honest: How many of you made a New Year's resolution to save more money?

Saving money can be especially hard to do in a tough economy, so kudos to you. For families at the bottom of the economic ladder, saving money can make a real difference.

Erin Currier directs the Pew Economic Mobility Project. She says "when low income families can develop their own savings, their own assets, their children are significantly more likely to move up the income ladder."

Children of low-saving (i.e., below median), low-income parents are significantly less likely to be upwardly mobile than children of high-saving, low-income parents.

Seventy-one percent of children born to high-saving, low-income parents move up from the bottom income quartile over a generation, compared to only 50 percent of children of low-saving, low-income parents.